Relisting after 7 years, KGN stock rockets 76000%

Mahesh Baser, finance manager at KGN Industries, says he is as clueless as any investor about the flight of KGN shares on the Bombay Stock Exchange (BSE) on Wednesday, when the stock opened for trading after a seven-year suspension-induced hiatus.

“I made at least three calls since morning to the BSE to find out what’s happening,” says Baser, who saw the shares spiral up and, at one point, quote over 76,000% above its intra-day low.

Someone was surely playing funny on a day when trading in KGN shares resumed after the revocation of a suspension order issued in 2001, and when there were no circuit filters applicable.

Individual shareholders have a stake of just 1.43% (or 3.18 lakh shares) in KGN. Almost half, or 49%, is held by the promoter group.
Another 49.5% is with domestic corporate bodies. Anyone could have bought and sold.

After opening at Rs 100 and briefly holding at those levels, the scrip zoomed to an all-time high at Rs 55,000 per share. That’s 76,288% more than its intra-day low of Rs 72. It closed the day at Rs 15,001. All this activity was on volumes of just 827 shares, and before trading in the counter was stopped at 12.20 pm.

Investors in KGN were frantically trying to get in touch with the company high command. “But I was as much in the dark as they were, and couldn’t help much,” says Baser, the man holding fort at the Ahmedabad headquarters of KGN Industries in the absence of chairman Ismail Memon, and his managing director son, Arif Memon. Both father and son are said to be traveling.

In its earlier avatar, KGN Industries was called Royal Finance and was a non-banking finance company. However, Baser says the company has now surrendered its NBFC licence, and has transformed itself into a castor oil trading company.

For FY08, KGN reported a profit of Rs 1.51 crore, which puts its earnings per share at Rs 0.68.

That makes its price to earnings ratio, which measures how expensive a stock is, look ridiculously exorbitant: Rs 22,060.

Investors would be better off following BSE’s word of caution in a notice on Tuesday, when it announced the revocation of KGN’s suspension: “Trading members are cautioned not to enter orders at unrealistic prices.”

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